AI to raise long-term loan of $1,150 mn

Air India plans to raise a long-term loan of $1,150 million to refinance 21 new A-320 aircraft.

The airline has invited request for qualification from both Indian and foreign banks and financial institutions, the last date being June 21.

With a total debt burden of Rs 42,000 crore (Rs 420 billion) already, the AI move aims to reduce the high-interest cost on a $1,150-million loan it had raised.

The loan was raised in July 2009 at IDBI PLR minus 100 basis points.

Airline sources told Business Standard: "AI had funded the cost of acquisition of 21 new A- 320 family aircraft through a rupee loan raised by a consortium of Indian banks, when international funding institutions were reluctant to lend due to a global recession.

"The proposed long-term loan is to be refunded through external commercial borrowings or through a rupee bond issue wherein the cost will work out to 9 per cent."

Sources said if AI is able to go in for ECB borrowing, it could be at an attractive rate above Libor that could result in substantial savings in interest cost.

It's present loan payment ranges between 11.5 and 12 per cent.

During the last three years the airline had raised $1.1 billion from JP Morgan for seven 777 aircraft and three 737-800 aircraft, the source added.

Besides, it had raised $600 million from KFW for a fleet of Airbus and $900 million from Standard Chartered Bank for Boeing.

The cost on dollar loans, except IDBI's rupee loan of $1.1 billion, is less than 3 per cent per annum.

AI's offer comes at a time when it has received offers from 16 agencies for its financial bid of $475 million for three 777 aircraft. Airline sources said the company has received offers at competitive rates above Libor.

It is currently evaluating these offers.

AI would continue to pursue its proposal with the Centre for getting Rs 5,000 crore (Rs 50 billion) as equity, the source added.

The government has already granted Rs 800 crore (Rs 8 billion) and has said it would provide another Rs 1,200 crore (Rs 12 billion).